ZS - The Earnings Parade Continues With More Than Just Retail
After struggling most of May, markets gather strength to start the final week of month. This will be another big week of retail earnings ahead including Best Buy (NYSE: BBY), Costco (NASDAQ: COST), Nordstrom (NYSE: JWN) and The Gap Inc (NYSE: GPS). Strength in retail sales over the last few months probably provided benefits for many of these firms, but what comes next is uncertain. However, there will be even more to this week than retail.
Tuesday – cybersecurity
Wall Street expects Zscaler (NASDAQ: ZS) to report earnings of 7 cents per share on revenue amounting to $163.71 million. Despite its status as the biggest provider of cloud-based web security gateway on the market, it lost almost 15% of its value year to date, while the S&P 500 index rose 11%. But given the better-than-expected results recently released from Palo Alto Networks Inc (NYSE: PANW), Zscaler could be poised for a rebound. Aside from its strong product portfolio, the company’s strength is seen in its exceptional gross margins and cash generation capability. The work-from-home mindset companies across the world adopted comes with increased demand for better security and Zscaler’s offerings support such a hybrid environment.
Mortgage
On Tuesday after markets close, Toll Brothers Inc (NYSE: TOL), one of the big home builders, is expected to report, and everyone will be listening what executives have to say about the recent bump in mortgage rates and how that might be affecting demand as last week saw a couple of figures fall below Wall Street’s expectations.
Wednesday – chip market
The semiconductor sector will be represented by Nvidia (NASDAQ: NVDA) with Wall Street expecting earnings of $3.27 per share on revenue of $5.39 billion.
On Friday, its shares rallied more than 4% after the chip giant announced that its board had approved a four-for-one stock split to make stock ownership more accessible to investors and employees, but stockholder approval is still needed with the vote scheduled for June 3 rd , at the company’s 2021 Annual Meeting. If approved, trading on a new basis is scheduled to begin on July 20 th . Considering it has taken the lead in chip productions for high-growth areas such as network data-center, autonomous driving and AI, among others, its guidance on Wednesday will be the key factor in deciding whether the stock will continue its upward path or succumb to profit taking. Its shares are already up almost 200% from its Covid-lows due to a great run for chip stocks but even with Friday’s rally, it is down 4% over the past month due to being punished during the tech selloff.
Thursday – big-box retail
Wall Street expects Costco to report earnings of $2.32 per share while generating revenue of $43.63 billion during the quarter. The company’s financial strength and ability to deliver exceptional value to consumers allow an excellent execution of its business plan. With historically strong traffic and membership renewals, as the company ended fiscal 2020 with 105 million members, reflecting about 6% annual growth, Argus analysts believe its stock won’t remain stagnant for very long despite having traded flat over the past six months and under-performing the S&P 500 index over the past year. The company’s profit margin guidance needs to show that better days are ahead.
SaaS
Wall Street expects Salesforce.com Inc (NYSE: CRM) to earn 88 cents per share on revenue of $5.89 billion. Its SaaS business model and its customer relationship management services have been key to the company’s growth over the past half of a decade, but there have been signs of market saturation. Moreover, its stock has pulled back since it announced the $27.7 acquisition of Slack Technologies (NYSE: WORK). Salesforce is poised to get its “mojo” back as the shares have fallen 13% in six months, but it needs to convince the market of how it plans to execute its strategy.
Wrapping up May
The earnings parade continues marching along this week without slowing down much despite more than a month of abundant earnings reports. Next Monday will be Memorial Day, and U.S. markets will be closed so May will be wrapped up with this week.
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